Inkitt — the Disney of the 21st Century
Because every author in the world should have an equal chance to succeed.
Kleiner Perkins recently led a $16m Series A round in Berlin-based Inkitt, with HV also joining as a new investor. Existing investors including Redalpine, SpeedInvest and Earlybird also participated in this impressive round.
Inkitt, the world’s first reader powered publisher, believes that every author in the world should have an equal chance to succeed. Inkitt’s mission is to discover hidden talents and turn them into globally successful authors. Inkitt was founded by Ali Albazaz in 2015.
Let’s explore what Inkitt exactly does and why HV is excited to join Inkitt on its journey to become the Disney of the 21st century.
What Inkitt does today
Content discovery — the old way
The content discovery decisions of even the world’s most renowned entertainment corporations are largely based on the gut feelings and experiences of their senior executives. In entertainment (like in VC) the difference between a good and a great project can be 10, 100, or 1,000x. But choosing which content to develop is fiendishly hard. I was involved in this process at Wooga (a games developer), where I experienced these difficulties first-hand.
Notorious examples abound. 13 publishers rejected Harry Potter before it turned into a $25bn franchise. Universal Pictures passed on Star Wars, calling it “a little strange” (and later bought it for $4bn).
On the other side of the table, high-potential writers have no means to publish their work to a sufficiently large audience without canvassing publishers. Self-publishing does not work. For this reason, many brilliant storytellers have likely been missed so far.
Inkitt challenges the Status Quo
However, thanks to Inkitt, the time of the creators has finally come. Already today, Inkitt has enabled 110,000+ authors to publish over 350,000 stories to an audience of approximately 1.6m volunteer beta readers. Authors and readers collaborate on the stories, refining plots, messaging and content until everything is perfect and resonates with the audience.
Inkitt also provides authors with (anonymised) data to algorithmically determine the quality of their work. Drop-off points, retention etc. become readily visible and can influence the creative work.
At the same time, using the reading data collected, Inkitt identifies the top-performing stories. The top-performing authors are offered a contract and paired with a team of in-house writers to prepare the stories for even wider distribution. Perfecting the “blockbuster detection algorithm” took years, but in 2017 it showed it’s true potential: 46 out of 50 books launched became bestsellers in the US on Amazon.
One of the newest distribution channels is Inkitt Galatea, an immersive fiction reading app for iOS and Google Play. Galatea brings stories to life through the addition of sound and visual effects, chat fiction, audio drama, and vibrations, Galatea transforms reading into an experience that evokes all the senses.
Launched just six months ago, in early 2019, and described as the “reading app for the Instagram generation” Galatea has become one of the fastest-growing apps in entertainment, attracting millions of users around the world. The outstanding reviews show how much readers enjoy the app.
And, as a former mobile marketeer, the marketing KPIs make me weep.
How it works for the authors
Two of the leading authors on Galatea are great examples how Inkitt can help hundreds of undiscovered authors find global success.
The most popular series on Galatea, The Millennium Wolves, is selling faster than Harry Potter did within the same period of time, boasting an impressive $1 million dollars in sales in the first six months after release. The series is based on an original novel written by Sapir Englard, a 24-year-old writer living outside Jerusalem. Sapir has been using the royalties earned on Galatea to finance her studies at the Berklee College of Music.
The Arrangement, the second most popular series on Galatea, was written by 22-year old S.S. Sahoo. The author lives in Odisha, India, where only 64% of the female population can read — and now she’s an author with a massive global audience. Her royalties have helped her family rebuild after a hurricane devastated their home in the spring of this year.
Before Inkitt, both of these outstanding authors would have had a very hard time being discovered.
How big can Inkitt get
$242bn. That’s the market cap of Disney.
More seriously, it is difficult to estimate the size of the addressable market as Galatea’s product offering is a new type of media. Nevertheless, there are similar product offerings such as conventionally published novels or eBooks that can serve as a benchmark.
In 2017, the European market for fictional books was estimated to exceed €13bn, with eBooks accounting for about 7% of total sales. In comparison, the American market for fictional books even amounted to $16bn, with an eBook market share of 17%. Over the last years, the number of people using electronic devices to read books has steadily increased.
Another market that can be considered as a benchmark is the mobile gaming market. Gaming could become more and more relevant, as Galatea becomes “richer” through features like AR/VR. In 2018, its global size was estimated to exceed $56bn, with China ($16bn) and the U.S. ($10bn) being the largest markets. In 2018, the global consumer spending on mobile gaming grew by more than 7% and is expected to keep growing at a CAGR exceeding 4% in the next years.
The third market to get an idea of how large Galatea could potentially become is the market for mobile video streaming. In 2018, more than 2bn people watched video content online, of which 78% used their mobile phones to do so. Netflix revenue was $15.8bn in 2018 (while spending ca. $12bn on content).
But Ali, the Inkitt founder, sees even wider potential. There are plans for TV series, movies — and maybe even, one day, Inkitt theme parks!
Key reasons to invest
The decision to participate in the Inkitt Series A was based on a few key reasons:
- Extremely ambitious founder and team. One of my colleagues asked Ali, the founder, when Millenium Wolves will stop growing faster than Harry Potter. His answer: why should it? This epitomises the attitude with which Ali and his team are going after this huge opportunity, with a strong sense of purpose.
- Purpose. Inkitt believes that every author in the world should have an equal chance to succeed. Turning the entire value chain upside down and improving it for both creators and consumers is something we are happy to support.
- Disruptive idea entering a huge market. Inkitt has the potential to revolutionise the entertainment industry. Discovering the best content programmatically, and launching it across all entertainment channels. What could be more fun?
- Market proof. With Galatea, the team has shown it can choose the right stories and promote them to a highly engaged audience. The initial traction is highly impressive, and shows no signs of slowing.
What’s next for Inkitt
The new investment will be used to help hundreds of undiscovered authors find global success. This will include expanding to more genres, adding new features such as virtual and augmented reality, the inclusion of ten new languages on Inkitt, and continuing efforts to grow readership and audience through the Galatea app.
As an investor, HV is proud to support Ali and the Inkitt team on its journey. There are exciting times ahead!
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